After reviewing the voter petitions filed in support of Initiative 522 (I-522), the Washington Secretary of State’s Election Division announced last Friday that the measure received enough signatures and has been certified. The official certification was signed by Secretary of State Kim Wyman.
I-522, also known as “The People’s Right to Know Genetically Engineered Food Act,” concerns the labeling of genetically engineered foods. Similar to Proposition 37 that was recently rejected by California, I-522 would require most raw agricultural commodities, processed foods, seeds and seed stocks, if produced through genetic engineering, to be labeled as such when offered for retail sale.
Now that initiative has been certified, it will be forwarded to the Legislature. Legislators have three options on an initiative sent their way: (1) pass it into law as is; (2) take no action, resulting in it going to the November ballot for a public vote; or (3) send it and a legislative alternative to the ballot and let voters decide which, if either, they support. Lawmakers commonly take the second approach and pass the initiative along to the public for a vote.
Final updates for I-522 can be seen here.
Last week on January 3, 2013, sponsors of Initiative 522 (I-522), a measure that would require the labeling of certain genetically engineered foods, filed their petitions with the Washington Secretary of State’s Office for review.
The filing of I-522 comes in the wake of Proposition 37, a similar initiative that was ultimately rejected by California voters in November 2012. If enacted, I-522 would require that any food offered for retail sale in Washington that is, or may have been, entirely or partly produced with genetic engineering to be labeled as follows:
- In the case of a raw agricultural commodity, the package offered for retail sale must clearly and conspicuously display the words “genetically engineered” on the front of the package, or where such a commodity is not separately packaged or labeled, the label appearing on the retail store shelf or bin where such a commodity is displayed for sale must display the words “genetically engineered;”
- In the case of any processed food, the front of the package of such food must clearly and conspicuously bear the words “partially produced with genetic engineering” or “may be partially produced with genetic engineering;” and
- In the case of any seed or seed stock, the seed or seed stock container, sales receipt or any other reference to identification, ownership, or possession, must state clearly and conspicuously that the seed is “genetically engineered” or “produced with genetic engineering.”
Like Proposition 37, I-522 exempts certain food from the genetically engineered labeling requirements. Specifically, the following certified organic products, alcoholic beverages, medical foods, food sold for immediate consumption such as in a restaurant, products unintentionally produced with genetically engineered material, food made from animals fed or injected with genetically engineered material but not genetically engineered themselves, food processed with or containing only small amounts of genetically engineered ingredients, and any processed food that would be subject to the labeling requirement solely because one or more processing aids or enzymes were produced or derived with genetic engineering.
Now that the petitions have been filed, they must be reviewed to confirm that the sponsors of the initiative have obtained the necessary 241,153 valid signatures of Washington registered voters. Once the signatures are verified, the initiative will then be turned to the Washington State Legislature for further action:
- The Legislature can adopt the initiative as proposed, in which case it becomes law without a vote of the people;
- The Legislature can reject or refuse to act on the proposed initiative, in which case the initiative must be placed on the ballot at the next state general election; or
- The Legislature can approve an alternative to the proposed initiative, in which case both the original proposal and the Legislature's alternative must be placed on the ballot at the next state general election.
The Washington Legislature will convene on Monday, January 14, 2013 and will be in session until April 28, 2013. Stoel Rives attorneys will report on the status on I-522 as it moves through the Legislature.
In addition to Washington's I-522, a bill that would mandate the labeling of food and commercial feed containing "genetically modified material" has been pre-filed in the New Mexico State Senate. Senate Bill (SB) 18, sponsored by Sen. Peter Wirth (D-Santa Fe), seeks to amend the New Mexico Food Act to require a disclosure label on any product containing more than one percent of a genetically modified material.
Although California’s Right to Know Genetically Engineered Food Act, better known as Proposition 37, failed earlier this month when put to a vote, food companies still remain vulnerable to attacks over the use of genetically engineered ingredients in their products.
Specifically, it appears that marketing a food as “all natural” when it contains a genetically engineered (GE) ingredient continues to generate class action litigation. The latest lawsuit challenging the use of the word “natural” on a product label was filed by plaintiff Sonya Bolerjack on November 6, 2012 in U.S. District Court for the District of Colorado against Pepperidge Farm, Inc. The class action complaint alleges that the company “mistakenly or misleadingly represented that its Cheddar Goldfish crackers are ‘Natural,’ when in fact, they are not, because they contain Genetically Modified Organisms (GMOs) in the form of soy and/or soy derivatives.” In particular, the plaintiff asserts that the product is not natural due to the presence of soybean oil.
The plaintiff claims that Pepperidge Farm violated Colorado’s Consumer Protection Act by engaging in deceptive trade practices; breached express warranties including that the product is natural even though it contains GMOs; and negligently misrepresented to the public through its packaging and labeling that the product is natural even though it contains GMOs.
In bringing this class action suit, the plaintiff is seeking certification on behalf of a class defined in the complaint as “all United States persons who have purchased Pepperidge Farm Cheddar Goldfish crackers containing Soybean Oil, for personal use, during the period extending from November 6, 2008, through and to the filing date of this Complaint.” Currently, a decision as to whether to grant or deny an order certifying that the action may be maintained as a class action is pending.
These class action lawsuits involving challenges to the use of “natural” or “all natural” language on a product label have been both costly and damaging to reputation. It also appears likely that they will continue. In order to avoid litigation, companies should review their products and labeling for synthetic preservatives or artificial ingredients included in or added to the food, so that product labeling is accurate.
Tomorrow, California voters will be asked to decide the fate of Proposition 37, a voter initiative that would require certain raw and processed foods that have or may have been “entirely or partially produced with genetic engineering” to be labeled as such, if sold in California. Proposition 37 contains a number of exemptions from the labeling requirement. Specifically, if passed, the following foods would be not be required to comply with the mandatory labeling provisions of the initiative:
- certified organic products;
- alcoholic beverages;
- medical foods;
- food sold for immediate consumption, such as in a restaurants;
- products unintentionally produced with genetically engineered material;
- food made from animals fed or injected with genetically engineered material but not genetically engineered themselves; and
- food processed with or containing only small amounts of genetically engineered ingredients.
Initially, Proposition 37 was supported by more than two-thirds of Californians who said they intended to vote on November 6, according to a poll from the California Business Roundtable and Pepperdine University’s School of Public Policy. On October 30, however, their latest poll indicated that support had dropped to approximately 39% and opposition had increased to almost 51 percent.
In addition to being the center of heated debate here in the U.S. over the past several months, the initiative has also received international attention. A recent article in The Guardian noted that “California’s ballot initiatives often take on huge importance. Often they are seen as laboratories for new ideas, that are adopted later in the rest of the country.”
Stoel Rives attorneys will be watching the outcome of the polls in California and will report on the results later this week.
Recently, I attended the annual American Agricultural Law Association (AALA) Conference in Nashville, TN. A topic on many of the attendees’ minds was California’s Proposition 37 or “The California Right to Know Genetically Engineered Food Act.” A previous discussion of Proposition 37 can be found here.
If passed in November, the voter initiative would require certain raw and processed foods that have or may have been “entirely or partially produced with genetic engineering” to be labeled as such. In addition, Subsection 110809.1 provides that if a food is “genetically engineered” or “processed” as those terms are defined under the initiative, the food’s label may not, in California, state or imply that the food is “natural,” “naturally made,” “naturally grown,” “all natural,” or use any words of similar import that might mislead any consumer.
As election day nears, the debate over Proposition 37 has reached fever pitch. Proponents of the initiative urge that consumers are entitled to make informed choices about the foods they purchase. On the other hand, opponents argue that the initiative would be burdensome on both producers and retailers and would result in excessive litigation.
While attending the AALA Conference, I had the pleasure of chatting with Drew Kershen, the Earl Sneed Centennial Professor of Law (Emeritus) at the University of Oklahoma College of Law. Professor Kershen recently published an article on a unique and important issue involving California’s Proposition 37. The article addresses whether Proposition 37 complies with World Trade Organization (WTO) Agreements and discusses the compatibility between the two.
In analyzing the relationship between Proposition 37 and WTO Agreements, more specifically the Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and the Agreement on Technical Barriers to Trade (the TBT Agreement), Professor Kershen concludes that the initiative “raises significant and difficult questions about whether it complies with the SPS Agreement or the TBT Agreement.” As a result, he notes that Proposition 37 can be challenged by member states to the WTO Agreements as well as the United States as a violation of WTO Agreements. However, it remains unclear as to whether those parties will act against Proposition 37.
Professor Kershen’s essay is a reduced version of a previously published article: “Would State-Mandate Labels for Biotech Foods Violate World Trade Agreements?,” Critical Legal Issues WORKING PAPER No. 181 (Wash. Lgl. Fndt., Sept. 2012), available at www.wlf.org/.
Stoel Rives attorneys continue to track the progress of Proposition 37 in California. Stay tuned for more updates as election day approaches.
The U.S. Department of Agriculture’s (USDA) Food Safety and Inspection Service (FSIS) is the primary agency charged with regulating the nation’s supply of meat, poultry, and egg products. Besides ensuring the safety and wholesomeness of those products, FSIS is also charged with the important function of reviewing the accuracy of all meat, poultry, and egg product labels.
Specifically, the Labeling and Program Delivery Division (LPDD) serves as the agency’s expert group on label review. The LPDD Staff examines all labels and labeling, including all forms of product identification, claims, net weight, species identification and nutrition related to meat, poultry, and egg products.
Typically, companies mail or hand deliver label applications to FSIS, which are then edited before being returned in hard copy. The agency often receives approximately 150 to 200 of these label submissions daily. As a result, the label review process can take weeks.
Yesterday, however, FSIS launched a new, web-based label approval system, called the Label Submission Approval System (LSAS), that aims to make the product label review process faster, cheaper, and more accurate. According to FSIS’ press release, “[LSAS] will make it possible for food manufacturers to submit label applications electronically, will flag application submission errors that could delay the approval process, and will allow users to track the progress of their submission.”
Under Secretary for Food Safety Dr. Elisabeth Hagen is hopeful that LSAS will be a vast improvement from the label review process currently in place. Hagen stated, “This new system will expedite and simplify the review process for meat, poultry and egg product labels. Reducing the review times for labels will enhance the agency’s ability to ensure that accurate information is applied to product labels and reaches consumers quickly.”
Meat, poultry and egg product establishments should consider using this new tool as it will save time and money for both the industry and the agency. However, FSIS is strongly encouraging those companies to first review the LSAS User’s Guide before attempting to submit their first label(s) through the new system. In addition, the agency plans to host webinars over the next few weeks to provide more information.
Recently I drafted an article on California's Proposition 65, which was published on FoodProcessing.com on April 9, 2012. More information about the article, with a link to the article on Proposition 65 can be found here: www.stoel.com/showarticle.aspx
Recently, on March 12, 2012, 55 Members of Congress sent a letter to the U.S. Food and Drug Administration (FDA) Commissioner Margaret Hamburg calling on the agency to require the labeling of genetically engineered (GE) foods.
The bicameral, bipartisan letter led by Senator Barbara Boxer (D-CA) and Congressman Peter DeFazio (D-OR) was written in support of a legal petition filed by the Center for Food Safety (CFS) on behalf of the Just Label It campaign and its nearly 400 partner organizations and businesses; many health, consumer, environmental, and farming organizations, as well as food companies, are also signatories. Since CFS filed the labeling petition in October 2011, the public has submitted over 850,000 comments in support of labeling.
The letter comes as the most recent move in the longstanding and familiar debate over whether the U.S. should require labeling of GE foods. For years, proponents of labeling have emphasized that consumers have a right to know what is in their food and have expressed concern over the potential unintended consequences of consuming GE food products. On the other hand, opponents have maintained that the expense and difficulty of labeling GE food products would be prohibitive.
As background information, GE or genetically modified (GM) foods are those whose genetic makeup has been altered using laboratory techniques in order to achieve certain desirable traits such as pesticide resistance, drought tolerance, or improved nutrient content. This process involves the introduction of foreign or synthetic DNA material into the organism’s cells. The technology used to produce genetically modified organisms (GMOs) is fairly new, having only been developed in the early 1970s. However, today, the use of that technology in commercial food production is widespread.
Nearly two decades ago, in May 1992, the FDA issued a Statement of Policy where it addressed the labeling of foods derived from new plant varieties, including plants developed by genetic engineering. The agency concluded that those GE foods do not differ from other foods in any meaningful or uniform way, and, as such, are not subject to special labeling requirements. This decision caused a stir among consumer advocacy groups who believed that GE foods should be labeled so that consumers can make fully informed choices. However, the FDA’s policy on GE food labeling has remained unchanged.
Congress’ letter from earlier this month urges the FDA to change that position. The letter notes that “[a]t issue is the fundamental right consumers have to make informed choices about the food they eat.” The Center for Food Safety has asked the FDA to respond to its petition within a “reasonable time.” It is unclear where the FDA will fall on this issue.
Yet despite the fact that there is currently no federal regulation mandating the labeling of GE foods, several states have begun to consider bills that would require labeling of GE foods or would prohibit them entirely. Among those states are California, Maryland, New York, North Carolina, Oregon, Tennessee, Vermont, and Washington. In addition, nearly 50 countries including the European Union member states, Japan and other important United States trading partners, have laws requiring companies to disclose the presence of GE ingredients on their food product labels.
It will be crucial for the food industry to pay careful attention to the changing state of the law surrounding GE food labeling to ensure that their product labels are in full compliance.
The “All Natural” class action litigation in California has continued into 2012, as expected. The claims in California are being filed under California’s consumer-friendly unfair competition law (or UCL), which is codified in sections 17200 and 17500 of the California Business & Professions Code, and the Consumer Legal Remedies Act (CLRA).
Given the costs and risks associated with UCL and CLRA class actions, many companies are getting pro-active and are carefully analyzing their labels. The challenge for such companies, however, is that these lawsuits are not limited to labels that contain the words “All Natural.” They fall into several broad categories.
First, there has been litigation over products that are marketed as being healthy but contain allegedly unhealthy ingredients, such as trans fat, saturated fat, high-fructose corn syrup or sugar. Consumer protection class actions may also arise like a claim for a defective product-- where an otherwise healthy product experiences a manufacturing, packaging or storage deviation that takes its ingredients outside of the representations made on the label and subjects the manufacturer to litigation over “deceptive labeling” practices.
Second, there has been litigation over products that claim to be “All Natural” or “100% Natural” that allegedly contain GMOs or other synthetic or artificial ingredients. The types of ingredients that have been challenged by plaintiffs include:
ascorbic acid (vitamin C)
beta-carotene (vitamin A)
calcium pantothenate (vitamin B5)
folic acid (a B vitamin)
soy proteins (from hexane)
Of course, many of these ingredients are used frequently in products and there is no evidence that they are harmful. But given the California Supreme Court’s recent finding that “labels matter” (as opposed to product quality), plaintiffs are seizing on the opportunity to claim that something that has been processed or contains any “artificial” ingredient cannot possibly be “All Natural.”
Third, there has been litigation over claims about the quality of ingredients, such as “100% Pure” claims on orange juice or coconut water labels.
Finally, there has been litigation over products that have unsubstantiated health benefit claims, such as “proven to reduce cholesterol,” “supports digestion, . . . metabolism, . . .[and] liver function,” “supports immunity,” “reduces risk of chronic diseases,” “promotes healthy joints,” or otherwise.
In the current environment (with the lack of guidance from FDA and various court rulings that have struck down motions to dismiss), companies cannot afford to ignore the risk of litigation. The important thing for companies to take away from the morphing UCL class action litigation in California is that a cursory review of product labels is no longer enough to help ensure loss prevention. The product, whether labeled “All Natural” or not, should be reviewed carefully as the litigation theories in California broaden. Indeed, as noted above, many of the class action lawsuits in California involve claims other than “All Natural.” Companies should conduct an intensive review of product ingredients (and consider testing) to ensure compliance with labeling regulations and to assess whether the ingredients and labeling claims are likely to result in unwanted attraction from the plaintiffs’ bar.
In follow up to previous articles, we note that a consumer group last week released a report that alleged that caramel colored sodas (Coke,Diet-Coke, Pepsi and Diet Pepsi) contain levels of 4-methylimidazole (4-MEI) that reached a level of 7 in a million cancer risk. The Center for Science in the Public Interest, claims that the carcinogen forms when ammonia or ammonia and sulfites are used to manufacture the caramel coloring that gives those sodas brown colors. In conjunction with their report the group requested that the Food and Drug Administration revoke its authorization for caramel colorings that contain 4-MEI, and in the interim to change the name of the additive to ammonia-sulfite process caramel coloring or chemically modified caramel coloring for labeling purposes.
Although according to industry experts the amount of soda that would trigger these effects is excessive, Coca Cola and Pepsi recently announced that they were changing their formulas, because of California's Prop 65 law that would require labeling if, as alleged, these products exceed the 1 in 100,000 risk that triggers labeling requirements.
As we noted earlier a sixty day notice has already been served on certain grocers with respect to similar products. The sixty day notice is the first step in the Prop 65 private enforcement process.
The Industry Acrylamide Coalition (Coalition) filed suit against the State of California Office of Environmental Health Hazard Assessment (OEHHA), the agency that manages and revised the Prop 65 list to include 4-metheylimidazole (4-MEI), as a carcinogen. 4-MEI is often found in cooked foods. The Coalition argues that the third party report on which the listing was based, from the National Toxicity Program (NTP), is insufficient to support a valid Prop 65 listing. The complaint, which was filed in Sacramento, alleges that OEHHA failed to consider the entire file of evidence before making its decision. The Coalition’s complaint also indicates that 4-MEI is created during normal cooking of food and ingredients and cannot easily be removed. The Coalition includes the American Beverage Association, the California League of Food Processors, and the Grocery Manufacturers Association of USA.
Acrylamide – In Your Coffee?
In a similar manner, the National Coffee Association is coordinating the joint defense of a number of coffee roasters and retailers with respect to a 60-day notice served on 40 roasters. The chemical at issue is acrylamide, which is formed when certain proteins are heated. Original scrutiny for this chemical concentrated on potato products such as french fries, but apparently the same chemical reaction occurs in coffee when it is roasted. In addition, other beverages that also contain caffeine, such as soft and energy drinks, have also received 60-day notices.
Dietary Supplements and Prop. 65
A dietary supplement company has been ordered to pay 2.65 million as part of a joint settlement with district attorneys in California. This is one of the larger suits filed and settled by a public enforcement entity, other than the California Attorney General. People v. Irwin Naturals, Inc., Orange County Superior Court, Case No. 30-2011-00445453.
Irwin Naturals was alleged to have made false and misleading representations with respect to the marketing and sales of its products. The products were advertised as having Hoodia Gordonii, an alleged appetite suppressant; however, lab results found that the chemical was not present and triggered a mislabeling suit. Additionally, the suit alleged that many of the products also exceeded the Prop. 65 level of proposed Maximum Allowable Dose Level (“MADL”) of .5 micrograms/dA1. Most of the indicated products were green tea products, sold without the Prop. 65 warning as required.
As part of the settlement, 1.95M in penalties were paid to help enforce state consumer protection laws, $100,000 in restitution, and $600,000 in set aside for investigation costs. Reportedly, prosecutors felt that this prosecution was necessary in part because the FDA does not regulate dietary supplements.
Here's a link to an article that appeared recently in Inside Washington's FDA Week concerning the issue of front-of-package labeling (FOP). The article takes aim at the debate about state vs. federal regulation of FOP labeling. Here's a link to a recent post in this blog on the FOP issue.
A recent decision held that Front of Package (”FOP”) labeling claims may not (yet) be subject to federal preemption. The decision in a putative class action, Chacanaca v. The Quaker Oats Company, involves what has become a common fact pattern: The FDA says an issue is complex and subject to industry guidance and possibly rule-making (for example, use of the terms “natural,” “wholesome,” and “smart choices”), while a court says the issue may not be complex and may be perfectly within the expertise of the judiciary and jury system.
Federal District Court Judge Richard Seeborg of the Northern District of California dismissed plaintiffs’ state law claims targeting the “0 grams trans fat,” “good source,” “made with whole grain oats,” and “no high fructose corn syrup” declarations on preemption grounds. Yet, insofar as Quaker Oats "seeks a favorable judgment at this juncture on all state claims that focus on the term 'wholesome'; on images of children, nuts, or oats; or the 'smart choices made easy' language or decal," the court denied the motion to dismiss.
The plaintiffs’ challenges to Quaker Oats’ use of the term ”wholesome” and images of the children seem targeted exactly at the claims that were preempted: the trans-fat issue. The court concedes that the FDA has recently indicated its intent to explore rule-making in the area of FOP labeling claims and that the FDA already “has extensively regulated food labeling in the context of a labyrinthine regulatory scheme.” “Nonetheless,” according to the court, ”plaintiffs advance a relatively straightforward claim: they assert that defendant has violated FDA regulations and marketed a product that could mislead a reasonable consumer. As courts faced with state-law challenges in the food labeling arena have reasoned, this is a question ’courts are well-equipped to handle.’”
Are the plaintiffs’ claims really that straightforward? How is a court "well-equipped" to determine the meaning of ”wholesome,” ”natural,” or other FOP claims? Is a court able to fully consider comments and information from all corners of the food manufacturing world? Isn’t this really in the wheelhouse of the regulators (or possibly the legislators)? Can the food business in the United States function effectively with individual courts and states determining their own common law (or even statutory) rules for product labeling?
There is a niche market out there for celebrity-endorsed food products that benefit charities. PLB Sports out of Pittsburgh appears to be a market leader in this niche, labeling products ranging from beef jerky to salsa to mustard with images and slogans relating to both individual sports figures and teams. Probably the most famous of these were Flutie Flakes, a breakfast cereal that supported an autism charity founded by Doug and Laurie Flutie in honor of their son. Usually, the product’s appeal—and its distribution—will be limited to the area where the team or athlete performs; Wayne Chrebet’s fans outside the New York area would have had to buy through PLB’s website.
Chad Ochocinco sponsored “OchocincO’s”, a honey nut toasted oat cereal, to benefit Feed the Children. Mr. Ochocinco, né Chad Johnson, is a flamboyant wide receiver for the Cincinnati Bengals, as renowned for his Twitter feed as his receiving prowess. His personal website will allow you to buy a t-shirt with the slogan, “That ain’t my baby.” He has 1.3 million followers on Twitter and 800,000 people “like” his Facebook page, which can garner over a thousand responses to him asking “what are y’all eating for lunch?” He does not lead a quiet life.
So in some ways it comes as no surprise that there was not just a misprint on the label of “OchocincO’s.” The problem apparently was a wrong toll-free prefix, which isn’t surprising since there are so many of them. Clearly someone, and not Mr. Ochocinco, failed to proof the copy on the box sufficiently before it was printed, the kind of mistake that happens every day. But this particular misprint would lead one, rather than to a number for more information about his selected charity, instead to a phone sex line. And the market for such cereals is of course young fans.
The boxes have been withdrawn from stores and the PLB website states that new boxes with the correct toll-free number will be printed. Presumably, PLB and the printer will settle whose fault the mistake was.
One imagines, though, that sales of OchcincO’s will soar because of the publicity from the mistake, greatly benefiting his charity. And somehow this just doesn’t seem like it would have happened with Flutie Flakes or David Eckstein’s Ecks’O’s.
UPDATE: For those interested in reviewing the Axis policy discussed in the motion, it can be linked here.
I'm often asked in my practice about the availability of insurance coverage for claims by consumers or competitors that products are deceptively labeled, marketed or advertised. Those interested in the topic should follow the litigation between Welch Foods, Inc. and its insurers regarding coverage for the putative consumer fraud and the Lanham Act claims asserted against Welch’s over the marketing of its pomegranate-containing juice products.
No rulings have been issued as of yet. But one of Welch's insurers, AXIS Surplus Insurance Company, has taken the interesting position that the "Media Wrongful Act" coverage in its policy provides no coverage. According to Axis's Motion for Summary Judgment, "[i]n a covered Media Wrongful Act claim, the Loss arises from, and is actionable based on, the creation or dissemination of the advertising."
Axis argues that the underlying claims that Welch's marketing of its product created "confusion, deception and mistake in the pomegranate juice market" are not covered under the Media Wrongful Act coverage because "the POM Complaint does not allege that Welch’s liability results from a media liability — i.e., a harm created by the creation or dissemination of Welch’s advertising — but from a liability resulting from the sale of juice which does not live up to such advertising." Axis explains further that "if the product conformed to the standards set forth in the advertisements, the putative class would not have a claim against Welch’s."
How is Axis's reasoning not circular? Can't Welch's argue the reverse in an equally compelling way: That had the putative class or competition believed that the advertising conformed to the product, there would be no claims against Welch's?
Indeed, isn't the counter to Axis's "blame the product argument" more compelling because claims against the labeling of the product itself are subject to federal preemption, and, therefore, they could not be brought by the putative class or the competition? The putative class and competition can ONLY bring claims related to the advertising and marketing.
By Guest Blogger Jay Eckhardt
In a dispute over product labeling and marketing, the Coca-Cola Company avoids liability as a result of its careful compliance with FDA rules. (Also, see Rick's post from last week, regarding Coca-Cola's victory in a dispute over its original formula label found on Coke® Classic.) But pomegranate champion POM Wonderful can still pursue a Lanham Act deceptive advertising claim against the company.
On May 5 the U.S. District Court for the Central District of California issued summary judgment orders that cut out two of POM's claims against Coca-Cola's "Minute Maid Enhanced Pomegranate Blueberry Flavored 100% Juice Blend." (Download a copy of the Central District of California's Order here.)
The court acknowledged that consumers have griped about the emphasis on pomegranate and blueberry in the Minute Maid product labeling and advertising. (See Ken's post about a consumer class action concerning Tropicana's pomegranate blueberry juice blend here.) Still, the court agreed with Coca-Cola that POM could not bring a Lanham Act claim challenging the product name, because the company complied with FDA labeling requirements. The Minute Maid product contains less than one-half of one percent (0.5%) pomegranate and blueberry juice, but the court determined that the name is compliant with FDA rules, which allow for product names that prominently cite ingredients that are less than prominent in volume. Because the label clearly notes that the juice is "flavored" with pomegranate and blueberry juice and that the juice is a "blend" of several juices, the court held that the name complies with applicable FDA regulations (21 C.F.R. §§ 102.33(c) and 101.22(i)(1)(i)).
A second claim raised by POM was thrown out by the court. POM sought restitution under California Business & Professions Code section 17200, which provides a cause of action for "Unfair Competition." The court dismissed this claim because "restitution" has been narrowly interpreted by the California Supreme Court, thus barring POM's claim for recovery of a "lost business opportunity." Among authorities cited for the decision to dismiss this claim, the court reported that POM's similar claims under California's Unfair Competition law, brought against Tropicana and Welch's, have recently been dismissed in separate actions.
A third claim survived Coca-Cola's summary judgment attack. POM may proceed under the Lanham Act to challenge the marketing and advertising for the "blueberry pomegranate" product. The court held that POM may attempt to prove at trial that advertising and marketing actually deceived customers, or that Coca-Cola willfully and intentionally misled customers with the marketing of its product.
As noted from the court's order, Coca-Cola is not the only target of POM's litigation strategy. Other juice makers, Tropicana and Welch's, have been the focus of POM's efforts to defend its niche. Ken reported on POM's challenge to Ocean Spray's pomegranate cranberry juice blend last August, when POM survived Ocean Spray's initial motion to dismiss all claims.
An inspired marketing campaign for POM's products, and its essential ingredient, helped build the pomegranate franchise. It's hard to say whether litigation against advertising and labeling practices of POM's pomegranate competitors will be effective. At the same time, there's no doubt that POM is well aware of the burdens of FDA labeling regulations – the company was one among 17 companies notified by the FDA last February that its product labeling and advertising did not pass muster. The FDA warned POM that its advertising was suspect, based on the health claims made on its web site about the benefits of pomegranate juice.
On April 27, the U.S. District Court for the Southern District of Illinois dismissed the case of Kremers v. Coca-Cola Company. The case involved another of these ubiquitous claims where someone is suing saying they were fooled by labeling on a product. Unfortunately, the case was dismissed on grounds that indicate we might never really know the answer to the real gravamen to the plaintiffs’ complaint.
The claim involved the change, famous in product lore, from Coke to “new Coke” and then back to “Coca-Cola classic.” In 1985, Coca-Cola Company announced it was reformulating its flagship brand, renaming it “New Coke.” Two months later, having learned that brand loyalty may indeed trump blind taste tests, it relaunched its old formula as “Coca-Cola classic.” Eventually, New Coke was renamed “Coke II” and is, according to Coca-Cola Company itself, no longer available in the United States.
The Kremers case involved what, at least on the can of Coke® I borrowed from my office, is a tiny legend at the bottom of the can, saying “Original Formula.” The claim was that the original formula” of Coca-Cola included sugar, not high fructose corn syrup, and therefore the phrase “Original Formula” was misleading, requiring, of course, the company to cough up damages to everyone who had been fooled by the phrase.
Unfortunately for the two named plaintiffs, fortunately for Coca-Cola Company and definitely unfortunately for anyone who wanted to find out the answer to the question of whether “Original Formula” could in fact be misleading, the two plaintiffs had different, but equally dispositive, flaws in their cases. Lead plaintiff Amanda Kremers couldn’t beat the five year Illinois statute of limitations for claims of unjust enrichment. She admitted in her deposition that she had first heard that high fructose corn syrup was in Coke® way back in the 1990s. Second named plaintiff Jason McCann admitted on deposition that he’d never read the words “Original Formula” on the can, which made it basically impossible for him to claim he was deceived. And both plaintiffs admitted to continuing to buy Coke® even after the case was brought, when they clearly could not have been deceived about the contents of the beverage, since they were already suing its manufacturer.
The unanswered question in the case is interesting. As you can see, the type size for “Original Formula” is about the same as the type size for “High Fructose Corn Syrup” on the ingredients label. That would probably argue against anyone being reasonably misled by the one by somehow failing to look at the other.
More to the point, however, is that the history of Coca-Cola does not support the plaintiff’s case. The “formula” of Coca-Cola is proprietary and a trade secret (though how much of a secret is of course the subject of debate). Coca-Cola used to include real live cocaine, as opposed to completely decocainized coca leaves. According to Snopes, at some point in the 1920’s
glycerin was added as a preservative, cocaine was eliminated, caffeine was greatly reduced, and citric acid was replaced by phosphoric acid, to name the changes we know about.
By “Original Formula,” they quite clearly mean “not that New Coke stuff everyone complained about in 1985.” Coca-Cola Company itself admits they misunderstood their own customers then; they’re just reassuring them now.
Also according to Snopes, when New Coke was introduced in 1985, there was no sugar in Coke®. So focusing on the high fructose corn syrup, as opposed to the other changes, seems likely to be an attack on HFCS more than anything to do with being fooled by which Coca-Cola formula is in the can.
Of course, if you want Coke® with real sugar, it’s available from Mexico (Sugared Coke® is also available in the United States in some areas around Passover, because observant Ashkenazic Jews don't eat corn during the holiday).
I haven’t drunk Coke® in years, but this past winter we were visiting some Mayan ruins and on the way back had lunch in Bacalar, where we had a choice of beer, bottled water and Coke®. I chose the Coke® and after one sip I realized that this was the beverage I had grown up with. Yes, sugar in Coke® does, at least to these taste buds, make a difference. But I can also read a label.
Froot Loops pre-dated Crosby, Stills, Nash & Young. I remember taking the Kellogg's factory tour in Battle Creek and being handed an individual-sized packet at the end of the tour, even before they hit the market. I was seven years old, but I knew they were cereal not fruit. Apparently, some other people think otherwise.
Ken has already blogged about the related, and dismissed, Crunchberry lawsuit. At the ABA Business Law Section Spring Meeting last weekend, my friend Teresa Harmon Wilton mentioned the Crunchberry case in her annual round-up of commercial law cases, and mentioned that the decision was based on the prior Froot Loops case. I looked down at my Blackberry, and that's when I realized there was an old Froot Loops case but I had just got notice of a new one.
Two old ones, actually.
In 2007, the United States District Court for the Central District of California dismissed a claim against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
In 2009, the United States District Court for the Eastern District of California dismissed a claim against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
On April 19, a complaint was filed in the United States District Court for the Northern District of California against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
There is clearly a pattern here. I would note that there is only one other federal court district in California, the Southern District in San Diego. Unless I missed a case there.
In the McKinniss case, the court dismissed claims for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Negligent Misrepresentation
- Breach of Express Warranty
- Unjust Enrichment
In the Videtto case, the court dismissed claims for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Intentional Misrepresentation
- Breach of Implied Warranties
In the Werbel complaint, plaintiff seeks damages for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Intentional Misrepresentation
- Breach of Implied Warranties
Each complaint referenced a study by the Strategic Alliance for Healthy Food and Activity Environments that found that foods it claimed suggested the presence of fruit did not in fact contain fruit. The courts have so far not cared much for this study, which doesn’t in any way demonstrate that anyone could be misled by the actual advertising on the package.
Raise your hand if you’re surprised at the fact that the same attorneys brought all three cases. Under our justice system, a plaintiff is not bound by the decision of a court to which he or she was not a party. An attorney is held to a different standard under Rule 11 of the Federal Rules of Civil Procedure. It will be interesting to see if there is anything that comes from expecting the same conditions to lead to a different outcome.
This post also appears on the Essential Nutrition Law Blog.
In an April 28 release, the Food and Drug Administration (the “FDA”) asked for comments and information from the public and other interested parties about front-of-pack (“FOP”) nutrition labeling and shelf tags in retail stores. The FOP is the part of the package label that is most likely to be examined under customary conditions of display for retail sale.
According to the FDA release, the FOP nutrition labeling effort aims to “maximize the number of consumers who readily notice, understand, and use point-of-purchase information to make nutritious choices for themselves and their families.” Specifically, the agency is seeking to learn more about:
• the extent to which consumers notice, use, and understand nutrition symbols on FOP labeling of food packages or on shelf tags in retail stores
• research that assesses and compares the effectiveness of particular approaches to FOP labeling
• graphic design, marketing, and advertising data and information that can help develop better point-of-purchase nutrition information
• how point-of-purchase information may affect decisions by food manufacturers to reformulate products
The FDA is accepting comments on this issue until July 28, 2010. Further information is available in a notice from the FDA and the Department of Health and Human Services announcing the establishment of a docket to obtain the data and other information that will be utilized in the FDA’s deliberations.
These recent developments did not appear out of thin air. As noted by our colleagues at the FDA Law Blog, in a March 3 letter to industry, the FDA said it is working to devise a front-of-pack labeling system that consumers can understand and use. In the meantime, the FDA announced plans to issue new draft guidance relating to front-of-pack calorie and nutrient labeling. The agency is also planning to issue draft guidance that would recommend nutritional criteria for foods that make “dietary guidance” statements (such as “Eat 2 cups of fruit a day for good health”) in their labeling. Dating back even further, in an October 2009 letter to the industry, the FDA said it was working on developing a regulation that would define the nutritional criteria that would have to be met by manufacturers making broad FOP or shelf label claims concerning the nutritional quality of a food.
Dr. Hamburg also noted that the FDA is in the process of notifying numerous manufacturers that their current labels are in violation of the law and subject to proceedings that will remove their misbranded products from the marketplace. Thus it appears the FDA is willing to back up this position with action. Given the increasing number of headlines such as this one regarding the ability of the armed forces to find able-bodied servicemen and women, the issue of how manufacturers communicate to consumers with respect to nutritional content is likely to be a subject of FDA scrutiny for the foreseeable future.
You've heard the phrase "buried in the bill," of course. Section 4205 of the "Patient Protection and Affordable Care Act," the health care reform bill President Obama signed on March 23, 2010, is contained on pages 1206-1214 of a 2407 page bill. It could hardly be more buried than that.
In very technical terms, Section 4205 inserts a new subclause (H) into Section 403(q)(5) of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 343(q)(5), and adds a proviso (referring to the new subclause (H)) in Section 403(q)(5)(A). Section 403 is entitled "Misbranded Food" and clause (q) is entitled "Nutrition Information." Previously, subclause (5)(A) has exempted both restaurant food or takeout food from federal nutritional labeling requirements.
The new statute creates a new regime for labeling, in essence only requiring caloric and other information to be provided by restaurants covered by the act, by vending machines owned by persons covered by the act, and by those who opt in to the act.
The covered restaurants are those "part of a chain of 20 or more locations doing business under the same name (regardless of the type of ownership of the locations).and offering for sale substantially the same items." This appears to be intended to cover chain restaurants even if they are franchised, or held in separate subsidiaries.
The substance required to be disclosed is actually quite discrete. It must be:
- In a clear and conspicuous manner
- Adjacent to the name of the standard menu item
- Clearly associated with the standard menu item
- Of the number of calories contained in the standard menu item as usually prepared and offered for sale
In addition, there must be posted prominently on the menu "designed to enable the public to understand, in the context of a total daily diet, the significance of the caloric information provided on the menu." This would include information about a recommended daily calorie intake.
Finally, all of the standard information required under clause (q)(1)(C) and (D), meaning the standard information on calories derived from fat, plus total fat, saturated fat, cholesterol, sodium, total carbohydrates, complex carbohydrates, sugars, dietary fiber and total protein, must be provided somewhere in the restaurant and a prominent, clear and conspicuous sign stating this fact must be on the menu or menu board.
The caloric disclosure also applies to a salad bar, buffet line, cafeteria line, or similar self-service line, "adjacent to each food offered," on the basis of per displayed food item or per serving.
Food establishments are required to have a reasonable basis for their nutrient content disclosures.
There will be regulations on how to deal with different flavors or combinations (such as soft drinks from a fountain with many choices or pizza with different toppings). Regulations can also add to the list of nutrients required to be disclosed.
Exceptions to the disclosure requirements include items not listed on the menu, such as condiments, daily specials not on the menu for less than 60 days per calendar year, and food that is part of a customary marketing test but for a period of less than 90 days.
Food from vending machines where the machine does not allow the nutrition facts panel to be seen prior to purchase is required to have "in close proximity to each article of food or the selection button" a clear and conspicuous statement of calories in the article. Vending machines are covered if they are operated by a person who is in the busienss of owning or operating 20 or more vending machines.
The Secretary of Health and Human Services has one year to propose regulations.
An important aspect of the law is its preemption of inconsistent state laws. This applies to the establishments required to be included, and any others that choose to opt into the program. Thus, a smaller chain that crosses state lines where the two states have differing disclosure rules can choose to follow the federal rule and thus be able to print and display consistent menus,as well as train their personnel on only one set of rules. The preemption does not apply to labeling requirements in the nature of warnings concerning the safety of food, presumably including the California warnings about alcohol during pregnancy.
Until the rules come out, of course, the devil will remain in the details.
Difficult Week for the Food Industry (Good Week for the Plaintiffs' Bar): HVP Salmonella and FDA Warning Letters
The week of March 1 saw a double whammy hit food manufacturers.
I. Open Letter to Industry on Marketing Claims
First, on March 3, FDA sent warning letters to 16 food manufacturers concerning their labeling practices. FDA also issued an Open Letter to Industry warning against certain practices. For example, FDA warned that:
o Nutrient content claims that FDA has authorized for use on foods for adults are not permitted on foods for children under two. Such claims are highly inappropriate when they appear on food for infants and toddlers because it is well known that the nutritional needs of the very young are different than those of adults.
o Claims that a product is free of trans fats, which imply that the product is a better choice than products without the claim, can be misleading when a product is high in saturated fat, and especially so when the claim is not accompanied by the required statement referring consumers to the more complete information on the Nutrition Facts panel.
o Products that claim to treat or mitigate disease are considered to be drugs and must meet the regulatory requirements for drugs, including the requirement to prove that the product is safe and effective for its intended use.
o Misleading “healthy” claims continue to appear on foods that do not meet the long- and well-established definition for use of that term.
o Juice products that mislead consumers into believing they consist entirely of a single juice are still on the market. Despite numerous admonitions from FDA over the years, we continue to see juice blends being inaccurately labeled as single-juice products.
II. HVP Recall
A day later, on March 4, FDA announced a recall of hydrolyzed vegetable protein (HVP). As of noon on March 4, 56 products containing HVP have been recalled. Some have suggested that HVP is the "Next Peanut Butter.”
III. What Food Companies Can Do in the Wake of FDA's Warning Letters and HVP Recall
What do last week's FDA warning letters and HVP recall have in common? The answer is, of course, litigation and exposure of brand value.
The first thing any affected food seller should do is engage its crisis management team. While lawyers and public relations staff are critical in crisis response, management of the crisis should not be left solely in the hands of either. Decisions should be made holistically, examining legal, public relations, business, financial and public health implications.
As discussed previously in this blog, companies faced with putative class claims filed as a result of the FDA warning letters on labeling should develop strategies to challenge the merits of the claims and class certification at the earliest possible stage. The end game for the plaintiffs' class action law firms is to obtain class certification and use that "litigation blackmail" to enter into a settlement with a handsome payout of attorneys’ fees.
For those companies with products that include recalled HVP, the good news is that there are few, if any, reported illnesses. The bad news is that recalls are very expensive and, for some companies without recall coverage or sufficient resources, financially devastating. Many food manufacturers were driven out of business in 2009 after being overwhelmed with the expenses of recalling products that included ingredients manufactured by Peanut Corporation of America (PCA).
For those affected companies with recall coverage or financial means, proactive measures can pay dividends. For example, offering refunds to consumers mitigates against putative class claims. Setting up consumer hotlines and payment of medical expenses for persons with illnesses linked to recalled products mitigates against personal injury suits.
In just a couple of weeks (Feb. 23-25), I’ll be in Austin for the GMA Food Claims & Litigation Conference. Let me know if you plan to attend. I’ll be presenting with Scott Rickman from Del Monte Foods on consumer fraud class claims arising from food product labeling and marketing. Anyone in the business of selling branded food products should be tracking the trends in consumer fraud class claims. Thanks to the erosion of preemption defenses and increased FDA enforcement action, we’re see many more of these claims, and more result in protracted litigation.
If you’re interested in a preview of the consumer fraud issues that we’ll cover, look at the related posts here. If you can’t be in Austin, let me know and I’ll be happy to share the PowerPoint slide deck and supplemental materials.
Also, if there’s something related to consumer fraud claims or food liability that we haven’t covered in the blog or that you’d like to see more coverage on, please let me know. We at foodliabilitylaw.com would love to hear your feedback. Thanks!
A recent headline in the Huffington Post breathlessly importuned:
If you only read the headline, you might think this was some important information that might change your eating habits. If you read the article, you would discover a balanced set of conclusions from a fairly limited study.
First, the limitations. The study tested a total of 29 dishes at 10 chain restaurants, plus some frozen supermarket meals from nationally-distributed brands. That's hardly a study of "restaurant food" in general.
Now the facts from the actual article:
- The only item that came up at 200% over the published calorie count was Denny's "grits and butter." Denny's responded to the study by pointing out the serving size for its calorie count was a four-ounce serving and the one used in the study was a 9.5 ounce serving. So you can pretty much discount the headline already.
- The average variation in calorie counts was nowhere near 200%; it was 18%. Or, according to my calculation, 1111.11% overstated.
- The Food and Drug Administration permits a variation of 20%, so even with the Denny's grits and butter (which was, to repeat, apparently not an appropriate comparison), the food in the aggregate met the government standard.
- Reasonable minds--in the person of two professors of nutrition--can differ about whether the calorie numbers on restaurant menus should be relied on.
- Some of the variation can easily be explained by such simple things as the fact that a different amount of mayonnaise may come off the spatula on different sandwiches.
One thing I know is that the reporter, who in this case appears to have done a careful and balanced job, is not the headline writer, whose job is to grab attention. And grab attention the headline did. If you read the article, you learned a lot. If you only read the headline, you learned nothing and might have been misled.
For the record, when my name is on the byline, I wrote the headline, too.
Take-Aways from November 17 Webinar: Sustainable Foods Increase Litigation Risks: Developing Strategies to Minimize Exposure
On November 17, we held our final webinar in a three-part series on bringing sustainable food products to market. Take-aways from the third webinar include:
• Be aware that "natural" is a hot button when advertising and labeling sustainable food products.
• "Sustainable" is not addressed in FTC Green Guides so it is imperative to be specific with your claim and/or use third-party certification.
• Truitt Brothers packaging/labels depict the source of their ingredients.
• Food-borne illness issues affect all food producers. Large producers have made significant investments in prevention in recent years; small producers of sustainable products without capital to improve farming or manufacturing practices are at a competitive disadvantage and possibly more susceptible to legal exposure from food borne illness claims.
• Food sellers should identify a crisis management team, review supplier agreements and understand insurance coverage to mitigate risk.
• Food sellers should understand that product recall coverage is excluded on most Commercial General Liability coverage forms.
Stay tuned for a possible new webinar series on food traceability. We're tracking the latest regulatory and legislative developments.
Take-Aways from November 3 Webinar: Making Good Marketing Claims: Product Labeling Pitfalls, Third-Party Certification and "Green Washing"
Tuesday, November 3, we held our second webinar in a three-part series on bringing sustainable food products to market. Thanks again to our presenters and attendees. The recorded webcast was archived and is accessible at this link. Click here to access a PDF copy of the presentation slides.
Take-aways from the second webinar include:
• With the exception of the FDA’s policy on “natural” claims, it has been silent on “green claims.”
• “Natural” could be hottest claim on the market but is becoming controversial. Food companies should continually monitor the marketplace to see which claims are drawing challenges.
• Food companies should pay attention to consumers union findings regarding eco-label credibility.
• While third-party certification may not help every food business, certification is a tool that supports your brand and your marketing/sales strategy.
• Retail leaders in sustainability, such as Burgerville, aspire for continuity of sustainability in each link in its supply chain.
• To understand the FTC green guidelines companies need to appreciate three key points: substantiation, specificity and qualification.
• To avoid “green washing” issues, food companies need to understand the complex matrix of federal, state, local and foreign statutes, regulations and guidelines governing “green” advertising.
I hope you can join me, Steve Marinkovich from Propel Insurance, my colleague at Stoel Rives, Anne Glazer, and Peter Truitt from Truitt Bros., Inc. on November 17, at 9 am PST, noon EST, (live Twitter feed at #sustainlaw) for the last webinar in the series as we discuss the following:
• Preventing and Dealing with Consumer Fraud, Unfair Trade and False Advertising Claims from Consumers and Competitors
• Real-Life Businesses Approaches to Sustainability, Product Labeling and Marketing
• Coping with Increased Risks of Food-Borne Illness from Local or Small Farm Products
• Insurance Coverage You Need, Think You May Have but Don’t Have or Think You May Want but Shouldn’t Get
By Guest Blogger Troy Hutchinson
In response to recent consumer complaints and state attorney general investigations that the use of the Smart Choices label is misleading and deceptive, food companies now face the threat of consumer class action litigation under state fraud and deceptive practices statutes.
Adding to the uproar, the Food and Drug Administration (FDA) announced that it will consider using its regulatory tools if front of pack nutrition labeling is not used in a common, credible way, it said in a letter to industry on October 20, 2009.
In a conference call with journalists, Margaret Hamburg of the FDA said that the FDA wants to work with industry, but that over time it “will take enforcement action for egregious examples.” Hamburg did not pinpoint specific products, but mentioned claims of “zero trans fats” on the front of packaging for products that have high levels of saturated fat, and said: “There are products that have got the Smart Choices check mark that are almost 50 percent sugar.”
At least one member of Congress has also weighed in on the issue. U.S. Rep. Rosa DeLauro announced that she is “very encouraged by FDA’s commitment to proceed with enforcement actions” against unauthorized claims. She went on to state that “[c]learly something is wrong when foods such as Froot Loops cereal, Cookie Crisp cereal, and Uncle Ben’s Instant Rice are designated as ‘healthy’ by these labeling systems.”
Responding to the FDA’s letter, president of the Grocery Manufacturers Association Pamela Bailey said in a statement that the organization is looking forward to working with the FDA “to determine what nutrition information is most useful in providing consumers with the tools they need to help them build a healthful diet.”
While companies who are using the Smart Choices program to promote legitimately healthy options should encourage FDA enforcement, that enforcement brings with it the risk of class action litigation. Whenever there are attorney general investigations or other regulatory enforcement action taken, class action litigation often follows. Food companies using the Smart Choices labeling should be strategizing on how best to defend these actions. Some private litigation may be preempted if the FDA has used its rule making authority. Where companies are legitimately using the Smart Choices label to promote healthier food options, those companies should encourage the FDA to use its rule making function to give clear rules on how companies can use the Smart Choices label.
While Denny's appears to be subject to a growing trend of people suing it to change its menu, Romano's Macaroni Grill is lowering the calories in its menu for another reason: to stem losses in sales. According to an article in the Wall Street Journal, Macaroni Grill is increasing sales while at the same time lowering food costs, prep time and the calories in its menu items. Criticism on The Today Show of a menu item with 1270 calories has caused it to be trimmed down to just 390 calories and 4 grams of fat.
As the debate over labeling caloric and other information in restaurants continues, this is an example of the market making its own correction without intervention from the legal system. According to Macaroni Grill, the new cherry tomatoes and small leaf basil in their tomato bruschetta makes the food taste better, too.
The Third Circuit ruled this week in Holk v. Snapple Beverage Corp., reversing the district court and reinstating the state law putative class claims for consumer fraud and breach of warranty for use of the term “all natural” despite the inclusion of high fructose corn syrup (HFCS) (though the court noted that the manufacturer no longer uses HFCS in its products).
The case is significant and is getting attention because the Third Circuit concluded that “FDA’s policy statement regarding the term ‘natural’ is not entitled to preemptive effect.” The court was persuaded because “the FDA declined to adopt a formal definition of the term ‘natural’ choosing instead to simply enforce its long standing ‘informal policy’”:
[T]he agency has considered “natural” to mean that nothing artificial or synthetic (including colors regardless of source) is included in, or has been added to, the product that would not normally be expected to be there. For example, the addition of beet juice to lemonade to make it pink would preclude the product being called “natural.”
As expected, the court followed its previous ruling in Fellner v. Tri-Union Seafood, LLC (our blog entry about it is here), ruling that neither the FDA’s “informal policy” nor their enforcement letters were entitled to any preemptive weight.
Practice Tip: For the next HFCS case, preemption may not be a dead issue. The Third Circuit did not rule (though it expressed its skepticism) on the “express preemption” argument based on 21 U.S.C. § 343-1(a)(3). The court ducked the issue by concluding that Snapple waived the argument by not “advancing it” in the district court.
The Third Circuit may be close to opening the floodgates of claims against food and beverage manufacturers who use high-fructose corn syrup (“HFCS”) in products labeled “all natural.” Shannon Duffy at the Legal Intelligencer reported recently on a “lively hour-long” oral argument in the Third Circuit about reversing a District Court’s dismissal of state consumer claims against Snapple for use of HFSC.
The District Court dismissed the consumer claims in 2007 on the basis of field preemption. The dismissal predated the Third Circuit’s decision in Fellner v. Tri-Union Seafood, LLC. See our previous blog on the Fellner case. Despite the FDA’s position in Fellner that a state law failure-to-warn claim is preempted by federal law, the Third Circuit ruled to the contrary.
In Fellner, a claim by a person who suffered from mercury poisoning after eating canned tuna literally for breakfast, lunch and dinner for five years may have been an outlier. But reversal of the District Court’s decision in the Snapple case will open the floodgates to consumer class action claims against a whole slew of food sellers and manufacturers.
Bill Marler funded independent research at the University of Idaho to study the adequacy of cooking instructions found on the packaging on various retail brands of frozen ground beef patties. The research was published this month in Food Protection Trends.
The study found that three of the packages included cooking instructions that “would be inadequate to produce a safely cooked patty.” Most of the issues raised in the article center on the variability in cooking techniques, e.g., pan frying, using a propane grill, or preheating, and variability in cooking temperatures. Suggested solutions for improved cooking instructions are included in the study.
For food sellers trying to minimize or avoid claims, adequate cooking instructions are a good thing. Even if food-borne illness claims cannot be avoided, the scope of the claims and damages can be limited by providing adequate, "bullet-proof", cooking instructions.
Kudos to Bill Marler for “putting skin in the game” and funding this study.
The U.S. Food and Drug Administration is taking issue with claims that Cheerios cereal can lower cholesterol.
In a letter to General Mills, the FDA says that statements made on Cheerios packaging like the claim that the cereal is “clinically proven to help lower cholesterol” make the product a drug under federal law. The agency suggests that General Mills should file a new drug application with the FDA if it wants to keep making these claims on Cheerios boxes. The FDA also noted concerns with statements made on a General Mills-sponsored website regarding the benefits of eating whole grains.
The Wall Street Journal is reporting that a General Mills spokesperson said the company will work with the FDA to reach a resolution regarding Cheerios labeling.
Ivar Haglund was a Seattle legend. In these parts, he was known only by his first name, the way you can refer to "Michael" when you're discussing basketball and people know you mean Michael Jordan. His food is at Sea-Tac Airport, Safeco Field and Qwest Field. From 1964 until it was discontinued for this year, he sponsored one of the largest fireworks displays in Seattle on the Fourth of July, which was called Fourth of Jul-Ivar's. Every city, I imagine, has someone like Ivar, but he was ours.
Ivar's is known for seafood. The original restaurant was called Acres of Clams, right on the waterfront. His landmark Salmon House is on Lake Union next to Dale Chihuly's house and studio; you can sometimes see Chihuly with his trademark patch walking past Ivar's.
I had no idea Ivar's made turkey soup until it was recalled.
You couldn't buy Ivar's turkey soup, more particularly "turkey-flavored egg noodle soup with turkey meat", even before it was recalled. It is only sold to institutions. I imagine it is a way of increasing revenue from by-products that might otherwise have to be thrown out or recycled.
So what was wrong with the soup?
Absolutely nothing. Bring it by and I'll happily consume it (though not expecting it to be a high-end product, given the market).
Ordinarily, I might note also that vegans don't ingest milk products either, so the mislabeling might cause an issue with them. And of course Jewish dietary laws prohibit the mixing of milk with poultry. So in both cases, there might have been mislabeling issues unrelated to milk's status as an allergen. However, vegans don't eat turkey anyway, and observant Jews only eat turkey that has been properly ritually slaughtered, as would be evidenced by a rabbi's stamp on the package, which I somehow doubt Ivar's had. Incidentally, the rabbinical kosher stamp here in Seattle incorporates a Space Needle into the K.
The California Court of Appeal for the First Appellate District has upheld a trial court ruling that canned tuna sold in California need not warn consumers about methylmercury.
In 2004, the State of California sued three tuna companies: Tri-Union Seafoods, LLC; Del Monte Corporation; and Bumble Bee Foods, LLC. The state argued, among other things, that California’s Proposition 65 requires the companies to provide warnings to pregnant women and women of childbearing age that the canned tuna the companies distribute and sell contains trace amounts of methylmercury, a chemical that can cause harm to a developing fetus. After a six-week trial in 2006, the lower court ruled against the state, holding that (i) Proposition 65 was preempted because it conflicts with federal law, (ii) the amount of methylmercury in canned tuna does not rise to the threshold level that would require a warning on the product, and (iii) the tuna companies are exempt from Proposition 65’s warning requirements because virtually all methylmercury is “naturally occurring.”
The state appealed, and the appellate court recently issued a decision upholding the tuna companies’ victory on the sole basis that substantial evidence supported the trial court’s finding that methylmercury is naturally occurring in canned tuna. Proposition 65 contains several exemptions to its warning requirements, one of which provides that there is no duty to warn if a chemical is naturally occurring in food. Significantly, the appellate court did not address the preemption or threshold level findings of the trial court. The court also posited scenarios that could lead to a renewed Proposition 65 claim against the tuna companies (see page 28 of the decision).
No word yet on whether the state plans to appeal to the California Supreme Court.
Center for Science in the Public Interest (CSPI) recently filed a putative class action in federal court in the Northern District of California claiming that Glacéau’s VitaminWater is mislabeled under California law. This suit comes on the heels of the recent Ninth Circuit decision that remanded the Gerber foods case. We previously discussed the Gerber case on this blog and how it presents “serious questions as to whether there are any clearly defined legal standards as to when a food label is misleading and when it’s not.”
The VitaminWater case appears to raise similar issues. CSPI fails to point to anything directly in VitaminWater’s labeling or advertising that is actually incorrect. Instead, CSPI asserts that “the central message” of VitaminWater’s labeling “is that drinking VitaminWater is good for one’s health.” CSPI asserts this is misleading because “VitaminWater is loaded with sugar” and as a result “may actually harm consumers’ health.” CSPI also faults the product labeling because it fails to disclose that Glacéau, the company that manufactures VitaminWater, was purchased by a soft drink manufacturer.
UPDATE to previous blog entries about the California salmon labeling case (Albertsons v. Kanter) -
Just yesterday, the U.S. Supreme Court denied certiorari. The Supreme Court's ruling followed briefing submitted by the Solicitor General (aka Bush Administration). The Bush Administration argued in support of the California Supreme Court's opinion that claims under state law for alleged mislabeling of salmon are not preempted by federal law. The ruling of the California Supreme Court denying federal preemption will stand. The case will be sent back to the trial court to proceed as a putative class action.
When Is Labeling Misleading and Actionable Under State Law? Is There Any Clearly Understood Standard?
A recent Ninth Circuit case again raises serious questions as to whether there are any clearly defined legal standards as to when a food label is misleading and when it’s not. Manufacturers who are in compliance with federal standards for labeling may still be liable under state law.
In Williams v. Gerber, the Ninth Circuit, reversing the district court, reinstated a putative class action that alleged labeling on “fruit juice snacks” (1) constituted misrepresentation and breach of warranty under California common law and (2) violated California’s statutes on unfair competition and consumer law. The district court had granted a motion to dismiss under Rule 12(b)(6), finding that statements on the label “were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box.”
Here’s the label in question:
In particular, the appellate court did not approve that the product, made of white grape juice, featured photographs of a variety of fruit on the label. The court also found misleading the statement that the product was made with “fruit juice and other all natural ingredients.” The product contained in addition to all-natural ingredients some ingredients the Ninth Circuit believed may not be “all natural.” The court believed that the statement, though not untruthful, should have disclosed more information.
Troubling in the court’s decision is that full nutritional and ingredient information was printed in similar size print on the same label. Even the court acknowledged that “reasonable consumers expect that the ingredient list contains more detailed information about the product . . . .” As a practical matter, the only way manufacturers can mitigate against these types of putative class actions is to involve lawyers directly in the marketing and labeling process. Under the world imagined in the Williams case, legal training seems to be a prerequisite to understanding which labels may give rise to litigation and which may not.
Unfortunately, 2009 does not promise to be any easier than 2008 in protecting your business against food liability claims. Many argue that threats will only increase in the new year. Here are five things you can do to reduce exposure in the coming year:
1. Review Insurance Coverage and Limits Carefully – Both the variety and size of claims are escalating fast. For example, just a couple of years ago consumer claims from non-O157 E. coli, melamine, diacetyl or organic labeling seemed far-fetched, but all are now a grave reality. Federal, state and local governments will continue improving detection techniques since the rash of large, national food-borne illness outbreaks in 2006-08. The Obama administration will likely make increased funding in this area a priority. The odds that your company will be targeted in a nationwide outbreak resulting in claims in the hundreds of millions of dollars are increasing. Because of the exposure, insurance companies now more than ever will be looking for ways to reduce their coverage.
2. Review and Revise Supply Chain Agreements – Aside from insurance, one of the most effective ways to reduce, spread and mitigate risk is to ensure that those in your supply chain provide adequate insurance and indemnity for problems related to their products. But just because your supply agreement happens to mention insurance and indemnity does not necessarily mean those clauses will help when you need them. The only way to ensure that they will be honored and enforced is to ensure that your legal team (experienced in litigating these clauses) drafts these carefully.
3. Reassess Suppliers – Your choice of suppliers may be key to avoiding or reducing risk. Even if you demand sufficient insurance and indemnity from a supplier, a supplier of sufficient size may not be able to access insurance or have assets available to satisfy indemnity obligations. As important as your food safety, HAACP and other programs may be, they are really only as strong as your suppliers’ programs. Careful audit and assessment of your suppliers’ food safety programs is important.
4. Increase Scrutiny Against Fraudulent Imports – Melamine, tainted rice and now “laundered honey” are all good examples of how fraud in the global food chain can dramatically affect unsuspecting U.S. food sellers. [add more advice here?]
5. Review, Update and Rehearse Crisis Management Plans – How your company is prepared to respond to a crisis is a good predictor of how your company will weather the crisis. With the stakes increasing, you need to be prepared to face the worst. Continual review, updating and rehearsal of your crisis management plan is key. Everybody on the crisis management team needs to understand his or her role and be ready for different scenarios.
As restaurant chains operating in King County, Washington are readying to comply with the new menu labeling law, serious questions arise. Does each menu item have to be sent to an expensive lab for testing? How accurate does the nutritional information need to be? How does a restaurant account for the inevitable variables of made-to-order meal preparation (an extra tablespoon of cooking oil can add 120 calories to a dish)? Does a restaurant that complies with the King County law open itself to consumer labeling claims because its nutritional information cannot be 100 percent accurate?
According to the Seattle Post Intelligencer (“PI”), the question concerning the tools that can be used by a restuarant chain to determine nutritional information may have been resolved in King County. The article reports that restaurant chains in King County have been given authority to “use nutritional software to calculate what was in each menu item rather than the pricey proposition of sending every dish off to a laboratory.”
What is not clear are what protections against consumer protection/tort liability a restaurant may have for “the natural variations that come with cooking restaurant food” or the variability between laboratory analysis and nutritional software. As one restaurateur said, “If you’re working by hand and making pasta, putting in cream and tossing in things as you go, it’s probably fairly close, but there are going to be variances because it’s not prepackaged . . . . Even if you’re cutting a meatloaf, if the specifications [sic] on the meatloaf is 12 ounces and (instead) cuts 13 ounces, it’s going to be off by 6 to 8 percent.”
Legal liability from variables in restaurant cooking is “not a theoretical fear.” As pointed out by the PI, “Applebee’s is facing a $5 million lawsuit over just that issue, after an independent lab found more calories and fat in a menu item than the chain’s nutritional information claimed.” One of the complaints filed against Applebee’s was by a person from the Seattle area.
Serious hurdles exist for any plaintiff’s attorney to prove liability and damages or certify as a class a nutritional labeling case against a restaurant:
1. Menu labeling suits are based on the theory that the nutritional information disclosed was 80, 90 or even 95 percent accurate and not 100 percent accurate. Does a reasonable consumer really believe that nutritional labeling of restaurant menu items has no room for error? Given the inherent and obvious variabilities involved, isn’t 80, 90 or 95 percent accuracy for nutritional information reasonable?
2. Even more significant, how does a plaintiff prove causation? Obesity, heart disease and other medical problems are complex medical problems. Even the medical community does not agree on causes of obesity. Surely, obesity , diabetes, and heart problems can't stem from a single meal or even a series of meals from just one restaurant that was 5 percent off in its estimate of nutritional information.
3. Even if liability can be established, class certification seems dubious. How can issues of liability or damages, which by definition vary with each person, ever be considered “common” or “typical” among a vast group of customers sufficient to justify class certification?
As we have seen over and over again in recent legal history, none of these barriers will deter every lawyer. The potential recovery and the targets (i.e. large restaurant chains) are too big not to try. Already, multiple putative class actions have been filed against Applebee’s.
Practically, several things should happen to protect restaurants doing their best to disclose nutritional information to their customers. First, restaurants should be advised to make sure their customers appreciate the variabilities and room for error in their nutritional information. The better a restaurant can prove that a plaintiff was not reasonable in reliance on 100 percent accuracy, the better its chance of having the plaintiff’s claims dismissed.
Second, there should be a legislative solution. The state legislature should exempt from the state consumer protection statute claims for nutritional labeling that meet an accepted standard. Why should restaurants that make their best efforts to disclose nutritional information to their customers be penalized? Without legislation, tort law and consumer protection statutes have the perverse effect of discouraging restaurants from providing disclosures to their customers.
Dr. Bronner’s Magic Soaps (“Dr. Bronner’s”) received a favorable ruling recently in its suit against competitors that it believes are misleading consumers by labeling cosmetic products as “Organic”. Part of Dr. Bronner’s claim appears to be that “Organic” standards established by the U.S. Department of Agriculture (“USDA”) set the bar for consumer expectations of "Organic" cosmetic products. The USDA’s National Organic Program (“NOP”) standards, according to the USDA, do not apply to “cosmetics, body care, or personal care products”. Dr. Bronner’s argues in its complaint that “[p]ersonal care products labeled as in compliance with ‘Organic’ or ‘Made with Organic [up to three specified ingredients]’ under the NOP criteria reflect basic organic consumer expectations . . . .” (Brackets in original.)
Last week, a California Superior Court in San Francisco overruled the demurrer of Ecocert France (SAS) and Ecocert, Inc. A demurrer is essentially a request made to a court, asking it to dismiss a lawsuit on the grounds that no legal claim is asserted.
According to Dr. Bronner’s, the “Court turned aside the defendants’ arguments that Dr. Bronner’s, in its complaint filed with the Court, had not sufficiently spelled out how actual consumers, the company and competition in the organic personal care industry have been hurt by the defendants’ deceptive practices.” The court’s ruling does not necessarily mean that Dr. Bronner’s is likely to succeed, only that it has articulated colorable claims. The court did not rule on the merits of these claims.
This case should be watched closely by those in cosmetics and food industries. Dr. Bronner’s claims turn, at least in part, on its view of “consumer expectations.” Do consumers have expectations as to what “Organic” means? Does it mean something different for cosmetic products? These are just a few of the significant questions that may be addressed in the litigation.
The California Supreme Court last week issued an opinion that federal law does not preempt complaints brought under state deceptive-marketing laws against grocery stores for allegedly selling artificially colored salmon.
The trial court found that claims were preempted by section 337(a) of title 21 of the U.S. Code, a provision of the Federal Food, Drug, and Cosmetic Act (“FDCA”) (21 U.S.C.
§ 301, et seq.).The Court of Appeal affirmed the resulting judgment of dismissal. The California Supreme Court concluded “that section 337(a) does not preempt the action as plaintiffs do not seek to ‘enforce, or to restrain violations’ of, the FDCA. (§ 337(a).) Rather, plaintiffs’ claims for deceptive marketing of food products are predicated on state laws establishing independent state disclosure requirements 'identical to' the disclosure requirements imposed by the FDCA, something Congress explicitly approved in section 343-1. (§ 343-1(a)(3).)”